Murfreesboro Realtor explains, Should I keep renting or should I buy a new home. In Middle Tennessee

April 26, 2010 - PRLog -- Should keep renting or should I buy a new home?

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In most cases it's better to buy instead of rent, and to buy as soon as you can afford to do so. The only exceptions are for people who have very low rent, or who plan on moving in a few years. So the first thing you need to do is to figure out whether buying is even a good idea for your situation.  
Most people think the benefit in buying is to "stop throwing your money away on rent," but in fact the equity you build from buying is mostly offset by the money you will "throw way" on taxes, insurance, maintenance, and mortgage interest, which renters don't pay. The real benefit from buying is that you freeze your monthly payment for 15 to 30 years, and then you stop paying it altogether.
Most homebuyers also make a cash down payment of 3 to 20% of the sale price. The higher the down payment you can make, the easier it is to get a loan, and the lower the interest rate is, and the lower the monthly payment is. But if you can't afford to make a down payment (or don't want to), banks are increasingly offering "zero-down" loans. In fact, 43% of first-time homebuyers put no money down.
In general you can afford a home worth about three times your annual household income. If your combined income is $50,000, you could afford a $150,000 house.
If it looks like you can't afford a home then consider getting a bigger home than you need and renting out part of it. This is especially applicable to single people, where the smallest home they can find might be too big for their needs. Later as your income increases and you can afford to live without renters you can do so, and you'll come out ahead by having bought sooner rather than later.
Your monthly payments will probably be 0.75% to 1.15% of the purchase price. On a $150,000 home that's $1125 to $1725/mo. This includes taxes and insurance. We'll cover how to estimate your monthly payment more accurately on the next page.
Money needed up front
3 to 20% of the purchase price for a down payment. The actual amount depends on what kind of loan you get and how good your credit is. Your bank might offer a zero-down loan, but if you can afford to make a down payment, you should do so, because you'll get a lower interest rate and because your monthly payments will be lower.
1 to 8% of the purchase price for closing costs. You might not have to pay this up front. The bank might be willing to add it to your mortgage. (Add them to the mortgage if you need the cash, but pay the closing costs up front if you don't.) The actual amount of closing costs depends on how good a deal your lender is willing to give you, and the price of the house. The more expensive the home, the less the closing costs are as a percentage of the total price.
$250 to $800 in Miscellaneous Costs. These are things like the application fee for the loan, the fee for the bank to run your credit report, professional inspection of the home, and an appraisal (if you can't get the appraisal added to the closing costs).
Putting these three things together, on a $150,000 house you'll need
$4500 to $30,000 for the down payment (unless you get a 0% down loan)
$0 to $12,000 for the closing costs
$250 to $800 for miscellaneous costs
Total: $4750 to $42,800

Please feel free to call or email me anytime.
Mike O'Donnell
615-473-5684
Tema@comcast.net
mbororealestate.com

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As a FULL TIME realtor in Murfreesboro TN, I can and will devote whatever time is needed to help you meet your real estate needs.
I treat each client with respect and dignity whether the property you are interested in is worth $5000 or $5,000,000.